Weaponized Keynesians

Paul Krugman writes:

A few years back Representative Barney Frank coined an apt phrase for many of his colleagues: weaponized Keynesians, defined as those who believe “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”

Right now the weaponized Keynesians are out in full force — which makes this a good time to see what’s really going on in debates over economic policy.

What’s bringing out the military big spenders is the approaching deadline for the so-called supercommittee to agree on a plan for deficit reduction. If no agreement is reached, this failure is supposed to trigger cuts in the defense budget.

Faced with this prospect, Republicans — who normally insist that the government can’t create jobs, and who have argued that lower, not higher, federal spending is the key to recovery — have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.

Thus Representative Buck McKeon, Republican of California, once attacked the Obama stimulus plan because “more spending is not what California or this country needs.” But two weeks ago, writing in The Wall Street Journal, Mr. McKeon — now the chairman of the House Armed Services Committee — warned that the defense cuts that are scheduled to take place if the supercommittee fails to agree would eliminate jobs and raise the unemployment rate.

Oh, the hypocrisy! But what makes this particular form of hypocrisy so enduring?

First things first: Military spending does create jobs when the economy is depressed. Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isn’t a morality play: spending on things you don’t like is still spending, and more spending would create more jobs.

But why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges?

John Maynard Keynes himself offered a partial answer 75 years ago, when he noted a curious “preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” Indeed. Spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Solyndra! Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition.

To deal with this preference, Keynes whimsically suggested burying bottles full of cash in disused mines and letting the private sector dig them back up. In the same vein, I recently suggested that a fake threat of alien invasion, requiring vast anti-alien spending, might be just the thing to get the economy moving again.

But there are also darker motives behind weaponized Keynesianism.

For one thing, to admit that public spending on useful projects can create jobs is to admit that such spending can in fact do good, that sometimes government is the solution, not the problem. Fear that voters might reach the same conclusion is, I’d argue, the main reason the right has always seen Keynesian economics as a leftist doctrine, when it’s actually nothing of the sort. However, spending on useless or, even better, destructive projects doesn’t present conservatives with the same problem.

Beyond that, there’s a point made long ago by the Polish economist Michael Kalecki: to admit that the government can create jobs is to reduce the perceived importance of business confidence.

Appeals to confidence have always been a key debating point for opponents of taxes and regulation; Wall Street’s whining about President Obama is part of a long tradition in which wealthy businessmen and their flacks argue that any hint of populism on the part of politicians will upset people like them, and that this is bad for the economy. Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power — so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts.

So I welcome the sudden upsurge in weaponized Keynesianism, which is revealing the reality behind our political debates. At a fundamental level, the opponents of any serious job-creation program know perfectly well that such a program would probably work, for the same reason that defense cuts would raise unemployment. But they don’t want voters to know what they know, because that would hurt their larger agenda — keeping regulation and taxes on the wealthy at bay.

In better days, the GOP was a plainly and simply Keynesian party, just as it was also a party of peace. Eisenhower ended the Korean War, took an even-handed approach to Israel and the Palestinians, declined to intervene in Indochina, denounced the military-industrial complex, and advocated nuclear power as “atoms for peace” 10 years after the Hiroshima and Nagasaki bombings: civil nuclear power as the ultimate beating of swords in ploughshares. In 1960, John F Kennedy branded Eisenhower and Nixon as soft on the Soviets.

But then, in 1954, Eisenhower had written to his brother, Edgar N Eisenhower, that, “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H L Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.”

Nixon suspended the draft, pursued détente with China, and ended the Vietnam War in union with Ford, an old stalwart of the America First Committee who went on to sign the Helsinki Accords. Nixon believed in wage and price control as surely as in the Clean Air Act and in the creation of the Environmental Protection Agency, as surely as in the War on Cancer and in the War on Drugs, as surely as in Title IX (banning sex discrimination in federally funded education) and in the desegregation of schools in the Deep South, and as surely as that the United States should launch no war over the Soviet Union’s treatment of its Zionist dissidents, who have turned out to have been just as unpleasant in their own way as were many other categories of those who happened to dissent from the Soviet regime, and who now constitute a significant obstacle to peace in the Middle East, where they are busily engaged in denaturalising both the indigenous Christians and the ultra-Orthodox Jews.

Nixon was forced out over something that no one really found shocking then any more than we would find it shocking now, although I suppose that we ought to mourn the passing of a world in which they felt obliged to pretend that they were shocked by it. He was forced out by the motley crew that had sought to replace Johnson with Bobby Kennedy as the Democratic nominee in 1968: the not always mutually exclusive categories of Friedmanites and Trotskyites, Israel Firsters and white supremacists; in the California primary, Kennedy had denounced Eugene McCarthy’s support for public housing as a “catastrophic” proposal to move black people into Orange County.

The Nixon and Ford Administrations stood in stark contrast to the pioneering monetarism and the Cold War sabre-rattling of the Carter Administration, which was particularly bad for abusing the noble cause of anti-Communism by emphasising Soviet human rights abuses while ignoring Chinese and Romanian ones. Carter, who was not above electorally opportunistic race-baiting, even happily allowed the Chinese-backed Pol Pot to retain control of the Cambodian seat at the UN after Phnom Penh had fallen to the rival forces backed by Vietnam and therefore by the Soviet Union. But Carter, for all his unsung prophetic calls against materialism in general and oil dependence in particular, had had the nerve to brand Ford as soft on Communism for his entirely factual statement that Yugoslavia, Romania and Poland were “not dominated” by the Soviet Union.

Reagan withdrew from Lebanon in 1983, and he initiated nuclear arms reduction in Europe. James Baker called on Israel to “lay aside, once and for all, the unrealistic vision of a Greater Israel” in order to “foreswear annexation, stop settlement activity”, and he negotiated the voluntary disposal of all nuclear weapons by Belarus, Kazakhstan and Ukraine. Republicans opposed the global trigger-happiness of the Clinton Administration. George W Bush removed American troops from Saudi Arabia after 11th September 2011, thus ensuring that there has been no further attack on American soil.

All in all, a very far cry indeed from the party of those who constantly bemoan Big Government while living their entire adult lives as wards of its federal, specifically military aspect.